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Traditional Freight Brokers Investing Millions To Stay On Top

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Traditional Freight Brokers Investing Millions To Stay On Top

New technologies are changing the way the freight brokerage industry performs day-to-day operations.

For the past several years it has been the consensus in the industry that the freight brokerage market is headed in the direction of doing everything it can to remove the human presence in booking loads. 

Proponents of digital freight brokerages pronounce the innovation as a win-win for everyone involved in the supply chain (except of course for the broker). Shippers will pay less because they are not paying for human interaction and carriers will still be able to make a decent margin while charging less. And the promise has been that the flexibility and openness will be second to none and that they can guarantee the same level of service that shippers expect from their human freight brokers. 

With the emergence of companies like Uber Freight, which just moved its headquarters from the Silicon Valley to Chicago, Seattle-based Convoy and New York-headquartered Transfix, all of which are well-capitalized and backed by well-known investors, the larger players in the industry cannot ignore the trend toward the highly technical digital freight brokerage. And as FreightWaves was the first to report, Amazon.com, Inc. (NASDAQ: AMZN) launched its freight brokerage this past April. Although these are the big players in the emerging digital freight brokerage space, the industry is crowded with a whole slew of smaller startups trying to make their name in the industry as well. 

Despite the influx of new companies into the $86.5 billion industry, some of the more traditional names in the business are holding their own for now. The biggest player in the field, C.H. Robinson Worldwide Inc. (NASDAQ: CHRW), stated that it will double its technology spend in the next five years. The company plans to spend more than $1 billion enhancing its technological capabilities in the near term. A large part of this will come in the way of salaries as the company plans to hire an army of scientists, engineers and developers to build out its technological presence.

The announcement from C.H. Robinson comes on the heels of other established transportation companies announcing they will be ramping up their technological spending as well. For instance, The Wall Street Journal reports that XPO Logistics has increased its capital spend by around $150 million this year to a planned $650 million. The company stated that a large chunk of that money is going toward technological expenditures. And J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) rolled out its J.B. Hunt 360 platform last year allowing carriers to find loads digitally.

C.H. Robinson argues that instead of reacting to Uber Freight and the other startups moving into its market, it is the process of constant improvement that is enticing the company to invest in new technologies. Last year C.H. Robinson released its own digital freight brokerage that connects carriers and shippers across all modes of transportation. The platform is a full TMS that utilizes an app for carriers and ties into different multiple trucking software platforms. Already more than 60% of C.H. Robinson's loads are fully digital, as are customer load tenders and customer communications. 

"We've been in the freight-matching business really since the deregulation of transportation in 1980," C.H. Robinson CEO Bob Biesterfeld told The Wall Street Journal. "We are around three times bigger than the next largest North American brokerage provider and somewhere around 14 times larger than the combination of the two largest digital upstart brokerages." Last year C.H. Robinson earned more than $16.5 billion in revenues from all its business lines.

Image Sourced from Pixabay

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